Stocks Tumble on Weak Earnings, Data

WSJ:

U.S. stocks tumbled deep into the red, appearing set to end a promising week on a sour note as a double dose of discouraging earnings reports and concerns about the pace of the economy sent the Dow Jones Industrial Average down 275 points.

The Dow, which snapped its seven-day winning streak Thursday, is now down 1.1% for the week, while the Standard & Poor's 500-stock index has dropped 1.3%. The Dow was recently down 270 points, or 2.6%, at 10088, and the S&P 500 declined 2.9% to 1064.

Its slide Friday upends a week that started on a strong note, as earnings from Alcoa and Intel fueled optimism about the profits of U.S. corporations. But the gains proved hard to hold, with concerns about the outlook for the U.S. economy in the second half moving front and center in investors' minds. Those concerns are casting a harsh light on earnings from large financial corporations with deep roots in Main Street.

Bank of America's 9% drop led the blue chips lower, erasing the index's weekly gains amid concerns the economy is expanding too slowly to spur corporate growth. Adding to the jitters was a morning report that showed consumer sentiment dropped to its worst level since March 2009, the latest in a string of downbeat data that slammed Wall Street.

"For the past several months the majority of the economic reports have been positive enough to say we're still in a long-term growth trend, but within the past couple weeks the trend is becoming less positive," said Randy Frederick, director of trading and derivatives at Charles Schwab. "It's almost like we're flattening out."

Investors turned pessimistic about growth prospects for major U.S. companies as Bank of America, Citigroup and General Electric posted lackluster results. There also was concern about how financial-regulatory overhaul will hurt earnings for the banking sector, which was the biggest decliner on the Standard & Poor's 500-stock index Friday.

The Nasdaq Composite declined 2.8%, to 2184, weighed down by the 6.3% drop in Google, which posted disappointing second-quarter results as its search business continued to show signs of slowing growth.

"At the end of the day, you saw a big snap back in the market over the last week or so off the lows without much justification behind it," said Gary Flam, portfolio manager for Bel Air Investment Advisors. "But the reality is we just received more data that called the sustainability of this economic recovery into question."

Posted via email from Jim Nichols